The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top private sector executive yesterday questioned whether planned amendments to the Value-Added Tax (VAT) Act are due to concerns that non-monthly filers are spending the taxes they collect on the Government’s behalf.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, said legislative changes as part of the 2015-2016 Budget “beg the question” whether quarterly VAT filers were not making timely payments.

He was speaking after Tribune Business uncovered, buried deep in the Budget documents, the Government’s intention to amend the VAT Act such that all quarterly and bi-annual filers are mandated by law to remit the taxes they collect on a monthly basis.

Listed among the Government’s 2015-2016 ‘fiscal measures’ is the plan to “amend the VAT Act to specify that all registrants, including those that file quarterly and half-yearly, pay VAT collected on a monthly basis”.

While the VAT unit has been encouraging such filers to make payments monthly, so that due taxes do not build up in their accounts and they become tempted to use it for working capital, there has been no indication until now that the Government was going to make this a legal obligation.

Many quarterly and bi-annual registrants have opted to pay VAT monthly to the Government, rather than wait until the filing of their returns becomes due.

Prime Minister Perry Christie, in yesterday’s Budget presentation, said quarterly filers had achieved a “just over” 80 per cent on-time compliance rate - just shy of the 90 per cent achieved by monthly filers. And registrant numbers have exceeded his expectations by 1,700.

However, the Government’s anxiety to boost its cash flow, and receive all that is due to it, is evident from the fact it is also proposing another amendment to the VAT Act that requires all registrants to keep taxes collected “in a separate account”.

Neither John Rolle, acting VAT comptroller, nor Michael Halkitis, minister of state for finance, could be reached for comment.

However, Mr Bowe told Tribune Business: “That begs the question: Is there concern over the amounts collected and [businesses] running the risk of non-compliance?

“Were they running the risk of spending the money and not having it available to pay? Is there some level of concern and tapering off of timeliness in payments being received?”

The proposed VAT Act amendments will also require “all taxpayers” to supply the Government with electronic filings, with specifics on invoices, tax credits and debit notes. This is likely to be a tough ask for many small and medium-sized registrants, especially on the Family Islands, who rely on manual systems.

Other amendments are intended to better define ‘international transport’ and ‘public entertainment’; clarify the rules on insurance and casino input tax credits; and “set the priority list for overdue payments”.

“Anti-avoidance” measures for the insurance industry will also be put in place.

Other changes foreshadowed in the Budget include a reduction in the top Business Licence tax rate from 1.75 per cent to 1.5 per cent, with agriculture and fisheries production businesses now getting a 0.75 per cent rate. The latter rate will also be applied uniformly for Family Island gas stations and fuel distributors.

Late Business Licence fee payments will be subject to a fine equal to 10 per cent of the sum due. And companies whose annual turnovers exceed $100,000 will be obligated by law to get their filings certified by an accountant.

Bahamian financial services regulators - the Central Bank, Securities Commission, Insurance Commission and Compliance Commission - will be able to share in the bank and trust company fees collected by the Government, thus helping to give them some financial independence.

Local government authorities, who help collect real property tax, will also be able to share some of the revenue collected.

The Government also plans to amend the Financial Administration and Audit Act to better enforce its taxes, and ensure it collects what is due.

Once the changes are passed into law, the Government will be able to recover the costs it incurs in collecting from delinquent taxpayers, while the financial secretary will be able to seize property to cover tax liabilities.

The Act also sets out the “priority” order in which government taxes must be paid. Top of the queue is penalties, followed by fines, interest or surcharge and then any outstanding taxes.

Business Licence fees are to be paid first, followed by VAT, Stamp Duties, Customs duties and real property tax.